House prices regained some of the drastic losses from last month, but the rise
failed to alter economists’ predictions that values will continue to fall in
the months ahead.

The latest house price index from Halifax revealed the value of a typical home in Britain climbed 1.8 per cent in October to £164,919, up 1.2 per cent on a year ago.

It follows a drop in average values of £6,000 In September, the biggest monthly fall since records began.

Martin Ellis, housing economist at Halifax, said: “There has been a very mixed picture of monthly house price rises and falls throughout 2010.

“An increase in the number of properties available for sale in recent months, together with a decline in demand, has put some downward pressure on prices in recent months. “We do not believe that prices are set to fall sharply over a sustained period. Interest rates are likely to remain very low for an extended period, which will continue to support the improved mortgage affordability position for homeowners. Low rates and stable employment levels are benefiting homeowners.”

It comes as the Bank of England decided to keep interest rates at 0.5 per cent - it is the longest period that interest rates have been left unchanged since World War Two.

Economists expect prices to continue falling, however – with some suggesting further falls of as much as 10 per cent by the end of next year.

Howard Archer, an economist at Global Insight, said: “The rise and fall in house prices is not inconsistent with our view that house prices will trend down gradually overall through the final months of 2010 and during 2011 rather than crash, to lose around 10 per cent of their value. Having said that, there may well be significant volatility around an overall gradually declining trend.”